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With millions of gallons of water at stake, and with it the future of fracking, Nuverra Environmental Solutions stands before a simply massive opportunity.

Believe it or not, hydraulic fracturing or fracking has been used to drill over one million wells in the past 60 years here in the U.S. However, its usage has been much more robust the past few years as we've applied it to shale formations along with horizontal drilling technology. Fracking enables oil and gas producers to unlock the vast resources trapped within these rocks. With notoriety, fracking has also gained its share of detractors.

The biggest concern with fracking centers on its environmental impact. Not only is there concern surrounding fracking fluids and natural gas seeping into the water tables, but many decry the massive amount of fresh water used in hydraulic fracturing. It's the opportunity to treat and recycle this water that holds the key to the future of Nuverra Environmental Solutions(OTC:NESC). Let's take a closer look.

The OpportunityIf you read through the annual report of most exploration and production companies, you'll see it listed among its risks something like this from LINN Energy's(OTC:LINEQ) last annual report:

We use a significant amount of water in our hydraulic fracturing operations. Our inability to locate sufficient amounts of water, or dispose of or recycle water used in our drilling and production operations, could adversely impact our operations. Moreover, new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of waste, including, but not limited to, produced water, drilling fluids and other wastes associated with the development or production of natural gas. Compliance with environmental regulations and permit requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse affect on our operations and financial condition.

Companies like Nuverra Environmental Solutions manage this risk. But unlike competitors such as Key Energy Services(NYSE:KEG) or Basic Energy Services(NYSE:BAS), Nuverra is a full-cycle environmental solution provider, while those companies provide fluid solutions as part of an oil-field services package. Nuverra's whole business is being built around its ability to transport the water to the drilling site, treat the produced water, recycle what it can, and then dispose of the leftovers. We are talking about millions of gallons of water per well.

The key going forward will be the recycling part of its business plan. Nuverra's big push over the next year will be to work with Halliburton(NYSE:HAL) and energy companies to increase the percentage of recycled water used in the process.

But the overall opportunity for Nuverra is immense. According to the company, total water consumption by the energy sector is expected to grow by three to four times, increasing from approximately 4.3 billion gallons of water per day in 1995 to 12-15 billion gallons of water per day by 2035. Energy companies currently spend an estimated $50 billion each year transporting, recycling and/or disposing of produced water giving Nuverra plenty of market share growth opportunities.

To capitalize on this opportunity, the company has three distinct avenues to pursue growth in its core business. These includes acquisition of in-house solutions from producers, acquisitions of its smaller competitors and expending capital to grow organically. Let's take a closer look at each opportunity.

To buy or to build Oil and gas production moves faster than the infrastructure needed to support it. That's why many producers have invested in their own produced water recycle and disposal systems. One producer in the Mississippian Lime has spent more than a half billion dollars to build its own salt water disposal system. While others have invested to build massive water treatment plants. Nuverra has a tremendous opportunity to acquire these water assets from cash starved producers and then leverage them by signing on additional producers.

The other acquisition option is to acquire companies similar to Bakken focused Power Fuels which it acquired at the end of last year. Environmental solutions have emerged thanks in part to myriads of entrepreneurs seeking to capitalize on the shale boom. But as larger producers have moved into shale plays and consolidated many smaller producers, Nuverra sees them preferring to work with a larger one-stop shop with a nationwide footprint. Nuverra's smaller competitors would be wise to latch on to it now before its comprehensive environmental solutions package puts them out of business.

Finally, Nuverra can deploy more capital throughout its network to capture organic growth opportunities. The company's capital spending plan fluctuates based on the opportunities it has to pursue, meaning that it can increase its capital spend if opportunities arise. This could include adding additional trucks, pipeline systems or disposal wells. Nuverra has the flexibility to capitalize on them by increasing its capital spend.

Investor takeawayOver the past few years growth at Nuverra has been very robust. But profits have been slipping as competition has been heating up. Not only that but operational missteps have really hurt its ability to grow. That makes 2014 a critical year for the company as it's really a make or break year for Nuverra to seize its potential to recover past lost opportunties and then work to deliver long-term returns for its investors.

Author

Matthew is a senior energy and materials specialist with The Motley Fool. He graduated from Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries: Follow @matthewdilallo